Justice News

Missouri Hospital System Agrees to Pay $9.3 Million to Resolve False Claims Act and Stark Law Violations

Hospital Allegedly Improperly Compensated Physicians for Referrals

Freeman Health System, a healthcare provider and hospital system located in Joplin, Mo., has agreed to pay $9,316,139 to resolve allegations that it violated the Stark Law and the False Claims Act by knowingly providing incentive pay to physicians in a manner that violated federal law, the Justice Department announced today.

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians that have a financial relationship with the hospital. A prohibited financial relationship includes an agreement between a hospital and a physician to compensate a physician based on the volume of the physician’s referrals or the revenue realized through those referrals.

Freeman disclosed to the U.S. Attorney for the Western District of Missouri that a number of its physicians were eligible for incentive compensation that may have taken into account the value and volume of their referrals. Based on its investigation of Freeman’s disclosures, the United States alleged that Freeman knowingly compensated some of its physicians in a manner that violated the Stark Law. Specifically, the United States alleged that Freeman provided incentive pay to 70 physicians employed at clinics operated by the health system based on the revenue generated by the physicians’ referrals for certain diagnostic testing and other services performed at the clinic, and that this financial arrangement created an incentive to refer patients for such procedures.

“Today’s resolution underscores our commitment to ensure that health care decisions are based on the best interests of patients rather than the personal financial interests of referring physicians,” said Stuart F. Delery, Acting Assistant Attorney General for the Department’s Civil Division. “The Department of Justice encourages companies to disclose potential violations of law, as was the case here .”

“Our priority is protecting the patients,” said David M. Ketchmark, Acting U.S. Attorney for the Western District of Missouri. “These laws are intended to ensure that physicians make referrals for health care services based solely on the medical needs of their patients rather than any financial incentives. These laws also protect the integrity of the government-funded health care benefit programs.”

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $13.8 billion.

This case was handled by the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Western District of Missouri, the Office of Inspector General of the U.S. Department of Health and Human Services, and the FBI. The claims settled by this agreement are allegations only, and there has been no determination of liability.